Implementing Vendor Management best practice in a project

Hi - I work for an organisation who has had issues with vendors in project (primarily software development). Does anyone has any advice or resources on vendor management best practice? Perhaps info on how they should be incorporated in the project team, deliverables, SLA's, KPI's etc?

I had always been only on the service provider (vendor) side of management.

But, what I think, is both the customer and vendor, their managements should
be adopting co-operative mode, understanding to the challenges faced by each
side. Delays and other factors affecting the course of the project may be
on both the sides and in such trying times, as long as they adopt
collaborative approach, it will be really helpful.

Having said that, if it is support project well defined SLAs and if
development or other projects, well defined milestones and deliverables /
KPIs, will help to evaluate the vendor. Also, risks and rewards in both
SLAs and KPIs model, will serve beneficial to both the sides. Eg. Successful
resolution of tickets within SLAs defined for every category or reduction of
back-log index, within permissible limits, etc., suggested to carry rewards
and non adherence to the same to carry penalties, after a pre-agreed
stabilization period.

It is a good practice to have a master agreement with the vendor to cover situations like non-delivery, delayed delivery, lack of resources, absence of PM attension, etc. It is also suggested to have Operational Level Agreements and/or SLAs depending on the nature of the project. These should be in place from the project start. If not, then ASAP.

The most important thing that needs to be developed is trust between the client and the vendor where both work towards a solution. Usually going over the failures without an eye for solutions causes stagnation and ensure death of the project.

Both client and vendor should appreciate the commercial and non-tangiable benefits of the project in the long run then the senior management usually assist for the project to conclude amicably.

The final game is setting the customer expectations right. The Customer
always keeps demanding more and at times it does get extremely
overbearing. What is held at ransom is the reputation we as vendors
stand to lose and the payments against milestones that are held in
abeyance.